Sustainable Finance and ESG

Risk, Management, Regulations, and Implications for Financial Institutions

herausgegeben von: Chrysovalantis Gaganis, Fotios Pasiouras, Menelaos Tasiou, Constantin Zopounidis

Verlag: Springer International Publishing

Buchreihe : Palgrave Macmillan Studies in Banking and Financial Institutions

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Technik" , Springer Professional "Wirtschaft"

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Über dieses Buch

In recent years sustainable finance along with Environmental, Social and Governance (ESG) aspects and their implications for financial institutions have attracted the attention of academics and policy makers. The aim of the book is to bring together chapters that discuss the most recent empirical and theoretical evidence in the field, along with policy making and regulatory initiatives. The book covers topics such as the changing role of banks in the financial system, the differences between sustainable banks and traditional banks, ESG and financial performance, bank social responsibility and customer satisfaction, ESG risk management of financial institutions, the politics of climate finance and policy initiatives, and the role of bank regulators. It will be of interest to academics and policymakers working in banking, risk management, sustainable finance and related fields.

Inhaltsverzeichnis

Frontmatter

The Changing Role of Banks in the Financial System: Social Versus Conventional Banks

Abstract

Social banks have emerged as a new group of banks that call themselves as “alternative”, “ethical”, “sustainable”, and “value-based”. Their small market share increases at a rapid pace and is still expected to grow in the future. Social banks are institutions with both (at least some) activities of financial intermediation and one or several non-financial missions, typically based on environmental and social values. By unpacking the observable, real-life differences between social banks and conventional banks, this chapter paves the way to theorizing the multidimensional characteristics of social banks within the global banking industry. Business models, governance issues, lending technologies, and social outcomes appear to be key aspects to understand how innovative, value-based, social banks work and how they might one day substantively affect mainstream banking business.

Simon Cornée, Anastasia Cozarenco, Ariane Szafarz

ESG Issues as Strategic Components of Long-term Success of Financial Institutions: Are There Differences in Financial Performance and Firm Value?

Abstract

This section discusses ESG issues as strategic success factors in the financial industry. After a historical overview, different ESG-related products and services and their principles will be discussed. We demonstrate that considering ESG criteria in financial activities has not only had an environmental and societal effect, but a financial effect as well. Considering ESG criteria has a positive effect on financial risk and on business opportunities. Furthermore, introducing ESG-related products and services might create additional income for banks and investment firms as it meets market demands. Consequently, we argue that ESG issues should become strategic components of financial institutions to guarantee long-term success. However, Integrating ESG into the corporate business strategy is not without difficulties. ESG criteria are still not standardized, and the quality of the indicators is often hard to evaluate.

Olaf Weber

Corporate Social Responsibility, Customer Satisfaction, and Customer Loyalty in Banking Institutions: A Literature Review

Abstract

Corporate social responsibility (CSR) is a concept adopted by various businesses and organizations and it is being constantly examined by researchers. One of the major industries that has incorporated CSR activities into their strategies is the bank sector. Literature in this topic is still being developed and multiple studies have emerged that investigate the impact of CSR on customer satisfaction and customer loyalty. Thus, the aim of this chapter is to review literature on the relationship between CSR, customer satisfaction, and loyalty. Related articles appearing in international journals from 2009 to 2021 have been examined and the findings provide an insight into the various perceptions of CSR and its impact on customer satisfaction and loyalty.

Stratos Kartsonakis, Evangelos Grigoroudis

Socially and Environmentally Responsible Investments and Mutual Funds

Abstract

The adoption of environmental, social, and governance (ESG) criteria has gained major interest among academics and practitioners for decision-making in banking, corporate finance, and investment appraisal. This chapter focuses on the incorporation of ESG factors in the context of designing and implementing socially and environmental fund management investment strategies (SRI). The principles of SRI and ESG are outlined, followed by an overview of their historical development, and the development of a list of various ESG criteria. Finally, an overview of the recent literature is presented, focusing on studies that examine the characteristics of socially responsible mutual funds and their performance, as well as behavioral and portfolio optimization issues.

Michalis Doumpos, Marianna Eskantar, Constantin Zopounidis

Firm ESG Practices and the Terms of Bank Lending

Abstract

Banks recognize environmental, social, and governance (ESG) risks as relevant factors in loan contracts since a growing number of such concerns threaten financial stability. We trace this literature focusing on interactions between borrowers’ ESG practices and their banking relationships. We analyze underlying theories why banks change their lending terms contingent on borrowers’ ESG profiles followed by exploring the channels through which firms’ ESG activities affect bank lending decisions, including loan interest rates, maturity, and collateral requirements. We also discuss how banks may affect borrowers’ ESG policies and investment via lending relationships. Finally, we provide new empirical evidence to show that banks’ ESG risks become more value-relevant in the capital market over time. We contribute to the literature by investigating the learning process between banks and borrowers, specifically showing that banks do learn by observing the ESG behaviors of responsible borrowers and consequently improve their own ESG scores.

Mingying Cheng, Iftekhar Hasan

ESG and Credit Risk

Abstract

In recent years, the incorporation of environmental, social and governance (ESG) factors into credit risk assessments has received attention from both academics and market participants. The present chapter consists of two main parts. The first part discusses academic studies that provide empirical evidence of the ESG-credit risk nexus and the implied mechanisms behind it. The second part discusses how the three major rating agencies (Fitch, Moody’s, S&P) view and incorporate ESG aspects into their credit ratings.

Chrysovalantis Gaganis, Fotios Pasiouras, Menelaos Tasiou

The Politics of Climate Finance and Policy Initiatives to Promote Sustainable Finance and Address ESG Issues

Abstract

This chapter examines the international and national efforts to expand green financing during the last decades. As a result, it addresses climate finance politics and policy measures, such as the Paris Agreement and the EU Action Plan on sustainable finance, and academic evidence on the impact of these initiatives on financial markets, including green bond market growth. According to the study, several “policy areas” still need to be enhanced, requiring international cooperation and further action at the country level to ensure a low-carbon transition. The establishment of standardized and mandatory disclosure rules, the adoption of internationally agreed-upon taxonomies of economic activity, and the promotion of climate-aligned financial metrics are all major areas for improvement.

Paola D’Orazio

The Role of Bank Regulators in the Promotion of Green and Climate Finance

Abstract

Over the past years, interest has increased in including environmental and climate-related issues in central banks, financial regulators, and supervisors’ activities. The scientific discussion and actions taken by these institutions are presented in this chapter. It describes how central banks are increasingly seen as key players in advancing regulations supporting a low-carbon or “net-zero” agenda and illustrates future policy directions and the new policy tools that central banks and financial regulators need to consider as climate change and its economic consequences are anticipated to generate new risks for financial markets.

Paola D’Orazio

Backmatter

Titel: Sustainable Finance and ESG
herausgegeben von: Chrysovalantis Gaganis
Fotios Pasiouras
Menelaos Tasiou
Constantin Zopounidis
Verlag: Springer International Publishing
Electronic ISBN: 978-3-031-24283-0
Print ISBN: 978-3-031-24282-3
DOI: https://doi.org/10.1007/978-3-031-24283-0